The Effect of Comparative Advantage and Competitive Advantage to Improve Indonesia's Essential Oil Export Performance in the International Market

This study investigates the impact of comparative and competitive advantages on Indonesia’s essential oils export performance in international markets. The analysis employs the Revealed Comparative Advantage (RCA) method to evaluate comparative strength and utilizes the Economic Complexity Index (ECI) to gauge competitive positioning. Using a quantitative explanatory approach, the research draws on secondary data from five major Asian trading partners—India, China, Japan, South Korea, and Malaysia—spanning the years 2019 to 2023. The findings indicate that RCA values have shown considerable volatility, with notable comparative advantages observed only during 2020 and 2021. In contrast, ECI values have declined sharply, entering negative territory in recent years, reflecting limited product sophistication and low value-added in Indonesia’s essential oils exports. The fluctuating RCA values reveal underlying structural challenges and difficulty in sustaining long-term competitiveness. The pronounced ECI decline highlights shortcomings in downstream processing, innovation gaps, and a dependence on exporting raw or minimally refined products. These factors hinder Indonesia’s ability to compete with nations like Japan and China, which excel through innovation-driven, advanced production systems. To improve its standing in the global market, Indonesia must implement integrated strategies that enhance product quality, promote value-added manufacturing, and tap into emerging export markets. Equally vital is fostering synergy between government, industry stakeholders, and the private sector to encourage innovation, strengthen SMEs, and modernize export infrastructure. Such collaborative efforts are key to developing a resilient and globally competitive essential oils sector capable of sustainable growth.